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Insurance rebates soften some on health law
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Lucia Harkenreader's check landed in her mailbox last week: a rebate of $456.15 from her health insurance company, with a letter dryly explaining that the money came courtesy of the federal health care law.
"It almost looked like junk mail," said Ms. Harkenreader, a tax accountant in Mountain Top, Pa., who said she did not love the overall law but was pleased at the unexpected windfall. "If this is part of Obamacare, I'm happy that somebody is finally coming down on the insurance companies and saying, 'Look, let's be fair here.' "
The law requires insurers to give out annual rebates by Aug. 1, starting this year, if less than 80 percent of the premium dollars they collect go toward medical care. For insurers covering large employers, the threshold is 85 percent.
As a result, insurers will pay out $1.1 billion this year, according to the Department of Health and Human Services, although most of it will not go to individuals. The average rebate will be $151 per household, with the highest average amounts going to people in Vermont ($807 per family), Alaska ($622) and Alabama ($518). No rebates will be issued in New Mexico or Rhode Island, because insurers there met the 80/20 requirement.
Although the percentage of insurance firms that owe rebates this year is relatively small, about 14 percent, many industry giants are on the list, including Aetna, Cigna, Humana and UnitedHealthCare.
President Barack Obama is highlighting the rebates as a tangible early benefit of the controversial legislation; on the day the Supreme Court upheld the law as constitutional last month, he said millions of Americans would see rebates because their insurance firms had "spent too much on things like administrative costs and CEO bonuses, and not enough on your health care."
So is your check in the mail? Don't count on it.
Self-insured employers, who cover more than half the nation's workers, are exempt from the new rule, as are Medicare and Medicaid. And of 75 million people in health plans subject to the rule, only about 17 percent, or 12.8 million, will see a rebate this year, the Obama administration said.
Many who buy coverage directly from insurers, such as Ms. Harkenreader and other self-employed people, are receiving checks. But in most cases, rebates are being sent to employers, who can choose to put them toward future premium costs instead of distributing them to workers.
"I've been trying to explain that to people -- that very few people would be getting a check," said Washington and Lee University law professor Timothy S. Jost, a health care law expert.
Still, Mr. Jost and others say the rebate provision could prove a potent selling point for a law that remains unpopular with many Americans, not to mention a well-timed tool for the Obama re-election campaign.
Premiums -- and anger toward insurance firms -- keep rising: the cost of employer-sponsored family health plans jumped by 9 percent last year, to more than $15,000, according to the Kaiser Family Foundation.
For Ms. Harkenreader, 53, who is putting a son through college, the rebate helps soothe the frustration she feels toward her insurer, Golden Rule, which is owned by UnitedHealthCare.
"It seems like the health insurance companies really just don't have any consideration for the cost out here," said Ms. Harkenreader, who pays about $480 a month for a high-deductible plan, up from $400 last year. "What costs have gone up to justify that rise in premium? I'd love to know. Did you give your people a raise? I guess your light bill went up?"
Mr. Jost said he had heard "quite a bit of anecdotal evidence of insurers giving really low premium increases this year" -- a sign that the rebate rule might already be having an effect. (This year's rebates are based on the share of premiums that went to administrative costs in 2011.)
First Published July 31, 2012 12:00 am
